Category: Analyst Reports

The Case for a Second iPhone Model

White iPhone 4

White iPhone 4 - Photo by dawvon

Having to wait over a year for a new model of iPhone is sending the rumour mill into delirium. Yesterday saw not one, but two analysts stick their heads above the parapet and oust the idea that Apple will later this year release two models of iPhone.

It all started with a report from Deutsche Bank analyst Chris Whitmore who declared “Its time for a mid-range iPhone” and pointed towards Apple releasing a lower-end unlocked iPhone priced between $300 and $500 and aimed at the prepaid market, so in effect contract free. Whitmore went on to discuss the merits of releasing a pre-paid only iPhone, he notes that Apple had sold around 87 million iPhone units in the past 2 years “which suggests it has reached only 6% penetration of its current addressable subscribers,” adding, “we believe Apple has room to run both in terms of greater market penetration as well as incremental carrier additions going forward.”

Whitmore then went onto to discuss how the lower-end iPhone, named the iPhone 4S would be priced at $349 in his estimations. For the record World of Apple has it from very good sources that the name iPhone 4S is a complete falsehood.

What Whitmore fails to effectively do in his report to analysts is outline how Apple would trim such massive amounts off the price of the iPhone without “negatively impacting profitability”.

The second source of this rumour is Morgan Stanley’s Katy Huberty. Katy never actually explicitly pointed towards two new iPhones but in her report in relation to recent meetings with unnamed individuals the analyst did say Apple is forecasting a large iPhone unit increase in 2012 “on the back of new products and potentially lower price points.”

So what merits does a second, lower cost iPhone have for Apple? The answer is obvious, it has every benefit but just because that is the case it doesn’t mean Apple is willing or preparing to do it. Take for example the netbook market; it’s a market that Apple has been vehemently opposed to but eventually entered with the MacBook Air. The one difference between the MacBook Air and the plethora of netbooks is the quality and the price, yet Apple’s MacBook Air is selling in extreme volumes.

We also have some insight to how Apple feels about the prepaid phone market, as noted by Jim Dalyrmple over at The Loop Apple’s COO Tim Cook earlier this year told Bernstein’s Toni Sacconaghi that the company “understood [that] price is big factor in the prepaid market” but Apple was not “ceding any market.”

What Tim Cook means by that comment is that until Apple feels ready and confident to enter the lower end market then it won’t do so. Apple will want quality hardware, the same software and apps and yet still want to keep the massive margins the iPhone currently offers.

iPhone 3GS

iPhone 3GS | Image courtesy of Apple

Yet Apple already plays a two iPhone game in some countries, in the US whilst Apple sells the iPhone 4 it also allows AT&T to sell the old 3GS for a subsidised rate of $49. Last year the 16GB iPhone 4 was estimated by iSuppli to cost $188 for Apple to produce, naturally this figure discounts shipping, packaging, advertising and other overheads and let us not forget Apple’s penchant for 60% margins on products. If Apple really wanted to enter the prepaid market, a 4 or 8GB iPhone 4 would seemingly be the best way for the company to do it.

With rumours suggesting that the next iPhone to be similar in appearance to the current iPhone 4, then the two models could share 70% of their components (display, touch panel, antenna, sensors, case, etc) whilst the lower-end iPhone 4 would be of lower capacity and still keep Apple’s A4 chip whilst the iPhone 5 packs an A5 and 32 and 64GB capacity.

Cook: Tablets Expected to Outperform PC Market

A report from Goldman Sachs analyst Bill Shope today shines a grand light on Apple’s future. Shope met last week with Apple’s Chief Operating officer Tim Cook, Senior Vice President of Retail Ron Johnson and Chief Financial officer Peter Oppenheimer to discuss the company’s prospects and future.

Details passed on by Business Insider are thin but in the meeting Cook is said to have explained why “he sees no reason why the tablet market shouldn’t eclipse the PC market over the next several years[…]”.

Shope also says that Apple’s iPhone is now on 200 carriers worldwide and Apple’s retail stores are “doing very well”.

Shope expects Apple to sell 8.1 million iPads in the June quarter, up 72% year-over-year.

Fallout From Foxconn Plant Explosion Continues

Following the explosion at Foxconn’s Chengdu plant on May 20 there have been a number of further developments. Over the weekend it was reported that a third person had died following the explosion that ripped through Foxconn’s newest assembly plant.

News coming out of China has been heavily restricted with speculation leaning on the idea that Foxconn is trying to cover up the incident. The news blackout has been skirted mainly by Taiwanese TV which is reporting out of China. There are a number of reports about reporters being forcefully removed from the area and their cameras destroyed or confiscated. Foxconn has also not released a list of victims to either the press or families.

It has been confirmed that the explosion was caused by a buildup of combustible dust that collected in a polishing workshop. As such Foxconn has halted all polishing operations. A spokesperson has indicated that the company has more than a week of inventory that will allow it to suspend polishing operations for safety checks.

The focus is now shifting away from the unfortunate human loss of life and onto the effect the incident could have on the production of Apple’s iPad 2 which just a month back was said to be facing the “mother of all backlogs”. Analysts will begin weighing in today with many expected to predict that this tragedy will only worsen Apple’s supply issues.

‘iPhone 4S’ Pinned for September Release, Adjusted Camera Revealed

The next generation iPhone is rumoured to arrive in September of this year and be dubbed ‘iPhone 4S’ if one report from an analyst is to be believed. The report from Jeffries & Co. analyst Peter Misek does cover some already well rumoured information but also adds a number of new tidbits.

Misek writes that the next iPhone will not support 4G networking and will stick with the current 3G connectivity of the current iPhone 4 with a minor update to HSPA+, the analyst also asserts that the iPhone update will be minor and be named ‘iPhone 4S’.

Citing industry checks as his source of data Misek goes onto describe the update as, “minor cosmetic changes, better cameras, A5 dual-core processor, and HSPA+ support.”

The analyst also notes that the upcoming iPhone update will be available on Sprint and T-Mobile in the United States and China Mobile in China.

Additionally, website has revealed purported images of both the front and rear facing camera from the next-generation iPhone. The parts from the often reliable site suggest little will change concerning the camera in the iPhone 5, with one notable difference. The rear camera shows that the LED-flash has been moved away from the immediate vicinity of the camera.

iPhone 5 camera parts

Purported iPhone 5 camera parts

Morgan Stanley Analyst Meets Top Apple Execs

Katy Huberty of chief Apple analyst for Morgan Stanley last week paid a visit to Apple to speak with three top executives. The meeting between Huberty and Apple executives Peter Oppenheimer, Ron Johnson and Eddy Cue reportedly contained no company secrets but did leave Huberty with “increased confidence.

The Morgan Stanley analyst reportedly pressed Apple on rumours of a later than normal iPhone launch but got no answer with the executives only talking about expanding iPhone penetration, building larger retail stores and increasing the number opened every year. Apple also said that it follows product cycles driven more by software than hardware.

Huberty now has a $540 price target on AAPL based on the following factors:

  • LTE iPhone upgrade cycle and lower priced 3G iPhone in 2012
  • Larger tablet market and continued Apple market dominance longer-term
  • Expanding distribution in China
  • Potential for Apple to enter the Smart TV market in 2012-13.

Huberty also bases her $540 target as a best case scenario in which iPhone sales grow 55% per year over the next two years, iPad sales grow 74% and Mac sales grow 17%.

Analyst Offers Insight Into Apple and Verizon Talks

Analyst for Kaufman Bros, Shaw Wu has written in a note to clients that Apple requires to bring another carrier onboard in the U.S. to continue iPhone growth but it doesn’t necessarily have to be Verizon.

Wu continues to explain that AT&T’s 90-million subscriber base is nearing iPhone saturation, Verizon has 93 million subscribers and would be a logical choice but would require a new iPhone model with CDMA capabilities.

Apple could also approach the other two main U.S. carriers, Sprint with 48 million subscribers and T-Mobile with 34 million.

Wu has been doing some research and looking into AT&T’s SEC 10-Q it mentions [PDF] that exclusivity with “a number of attractive handsets” could end. AT&T adds “we expect to continue to offer such handsets (based on historical industry practice), and we believe our service plan offerings will help to retain our customers by providing incentives not to move to a new carrier.”

For this reason Wu believes that Apple will begin entering into an agreement with another carrier in 2011 and “potentially Verizon in 2011 or 2012”. Shaw Wu adds, “We believe the argument for AAPL to pursue Verizon sooner than later is to address the growing presence of Android. What better way to do that than where Android has seen the majority of its success?”

With some purported inside knowledge Wu continues to say that, “Verizon negotiations are not finalized with important details still being ironed out”.

iPad Shipments Estimated at 1.2 Million Per Month

Apple iPad

Apple iPad

According to a brief report in the Digitimes Samsung will begin shipping 9.7-inch display panels to Apple in July at a rate of 300,000 – 500,000 units per month. The report also notes that LG who is already making iPad displays shipped 800,000 – 900,000 9.7-inch panels in May.

Analyst Kuo Ming-Chi for Digitimes Research predicted that Apple will ship 1.2 million iPads per month with shipments reaching 2.5 million per month by the end of 2010.

The report is in contrast to Forrester Research note delivered to clients earlier in the week which pinpointed the U.S. consumer tablet market to only consists of 3.5 million units in 2010. Apple has already announced sales of over 2 million iPads.

Forrester’s Sarah Rotman Epps is suggesting that between June and December all tablet manufacturers including Apple will only sell 1.5 million units or just 215,000 units a month.

Munster Labels WWDC 2010 “a Non-Event”

In a note to clients this morning Piper Jaffray analyst Gene Munster has labelled the upcoming Worldwide Developers Conference as “a non-event” for Apple’s share price and expects few surprises.

In the note Munster writes that the iPhone Steve Jobs is expected to unveil will drive sales beyond Wall Street estimates and will continue “providing a positive catalyst for shares of AAPL in the coming months.”

Munster has put together a list of expectations for the WWDC 2010 keynote on Monday, June 7:

  • New iPhone: Likely – the design we’re all familiar with from leaked images and videos. Will feature a front-facing camera, thinner design, improved rear camera, better battery life and capacities of 32/64GB. Expected to be priced at $199/$299 and on sale by end of June. Munster expects iPhone 3G to be discontinued and iPhone 3GS to enter $99 price point.
  • iPhone available from Verizon: Unlikely – Apple expected to stick with AT&T “for now”.
  • iPad sales update: Possible – WWDC will mark five weeks since the iPad went on sale. Munster expects Jobs to announce updated sales figures.
  • New Mac OS demo: Possible – Munster writes that Apple hasn’t put as much energy into Mac OS like it was iPhone OS. The analyst believes a demo of Mac OS X 10.7 would not be “out of order”.

U.S Mac Sales Expected to Climb 39% in April

April sales of Mac seem ahead of street expectations according to Piper Jaffray analyst Gene Munster who quotes data from research firm NPD.

The data from NPD shows that Mac sales grew 39% year-over-year with the street consensus resting on 19% growth for the June quarter.

Munster also goes onto to discuss iPad cannibalisation which he believes is having a stronger effect on the sale of iPods rather than Macs. iPod unit sales are predicted by NPD to be down 17% year-over-year for April.

“Given the ASP and margin profile of the iPad, we see this as a net positive for Apple’s business,” Munster writes. “We believe in the long run Mac cannibalization will exist, but will be minimal.”

Foxconn Predicted to Ship 24 Million Next-Gen iPhones in 2010

iPhone HD (side shot)

iPhone HD (side shot) | Image courtesy of Tinhte

Citing Taiwan-based component makers, Digitimes senior analysts Ming-Chi Kuo are predicting that Foxconn the suspected assembler of the next-gen iPhone dubbed iPhone HD will ship “4.5 million units in the first half and 19.5 million units for the rest of 2010”.

The article also points towards Apple unveiling iPhone HD on June 7 at WWDC 2010 but does not cite a shipping date.

Digitimes also goes onto discuss how the iPhone HD which has purportedly been revealed in public over the last few weeks will feature an IPS display panel, similar to that of the iPad and has rumoured in the past pack a 960 x 640 high-resolution display; “LG Display and Prime View International are the panel suppliers”.

In contrast to the discoveries of teardowns of prototype units Digitimes reports that iPhone HD will have a “512MB memory module from Samsung Electronics”, double that of the current iPhone 3GS. The battery in iPhone HD will also be larger thanks to the thinner display panel and will be supplied by Simplo Technology and Dynapack International Technology.